Interview on the Ray Hadley Morning Show, 2GB

The Federal Treasurer Joe Hockey’s on the line. Treasurer, good morning.

TREASURER:

Good morning Ray.

RAY HADLEY:

One of the things that – and I’ve got to – you know, not declare interest here but say how I’d feel. I’m the vendor; I want to get the most I can for my property.

TREASURER:

Yep.

RAY HADLEY:

There’s 22 registered buyers.

TREASURER:

Yep.

RAY HADLEY:

Nineteen are of Asian extraction – they may be Asian Australians, I don’t know. If my reserve is $600,000 and I get $900,000 because of the spirit of bidding, I’m really happy…

TREASURER:

Yep.

RAY HADLEY:

But the other 21 people who didn’t buy and the Asian [inaudible] they’re unhappy. What do we do?

TREASURER:

Well, that’s the market and we want foreign investment and we need foreign investment, but there’s got to be integrity around the system. Now, if you’re selling the property, it’s effectively a second-hand property and foreign citizens are not allowed to buy – not allowed to buy, unless they have approval and that approval is only fleetingly given [inaudible] they are not allowed to buy a second-hand property.

RAY HADLEY:

So, how are they getting around it?

TREASURER:

Well, some are just buying them – some of them are just buying them and not notifying the Foreign Investment Review Board or notifying the Government that they have bought that property.

RAY HADLEY:

But so – the real estate agent who issues them with, you know, a buyer’s ticket so to speak – register them – they don’t enquire as to they’re naturalised Australians or not? What they don’t care?

TREASURER:

No, they don’t, no they don’t. So, what we’ve announced today is a fee regime and also a penalty regime. The fee regime means any foreign buyer of residential property up to $1 million has to pay a $5,000 application fee and after $1 million, a $10,000 application fee, and $10,000 extra for every $1 million after that. Also, we’re going to set up a register so we know exactly what land is owned by what foreign interest. At the moment, we have no register. Thirdly, we’re going to set up a penalty regime, where if a property is unlawfully purchased by a foreigner, then they can be fined up to 25 per cent of the value of the property.

RAY HADLEY:

How do they caught?

TREASURER:

Sorry, how do they get caught?

RAY HADLEY:

Yeah.

TREASURER:

It’s going to come by data-matching, the Australian Taxation Office, Department of Immigration. None of this has happened under Labor, Ray, it’s happening under us. We’re going to get on with it and I’ve been dumbfounded – absolutely dumbfounded at the lack of resources, and inability of the Foreign Investment Review Board to get us the data on this.

RAY HADLEY:

So, if you’re a permanent resident or an Australian citizen – it doesn’t matter whether you’re Chinese, Japanese or any other ‘ese’ – you can buy what you like?

TREASURER:

Correct.

RAY HADLEY:

But if you’re not a permanent resident or a citizen, you’ll have to be…

TREASURER:

You have to apply – you have to apply for foreign investment…

RAY HADLEY:

…to go through these checks and balances?

TREASURER:

That’s correct, absolutely. You know Ray, I mean, as we’ve dug a little deeper, we’ve found cases that – and I’ll have more to say about them in the next few weeks – we’ve found cases where foreign citizens have purchased Australian property for $10, $20, $30 million dollars, we don’t – it had no screening process. It might be in some cases a form of money laundering, it could be a case that they simply are determined not to comply with local law; it’s unacceptable.

RAY HADLEY:

One of the things I don’t quite understand, and look I don’t want target Chinese people because Chinese-Australians make a very valuable contribution to us as a nation, but I don’t get this and I’ve tried to ask a couple of mates and they’ve given me some explanations. Let’s talk about the place worth $4 million as opposed to $20 million and they’re clear that they are Asian or Chinese citizens, so they go ahead and they buy it, and you say they buy it illegally under the current legislation. Now, they’ve got to get the money out of China to pay for it. There are restrictions on how to get the money out of China. Have you got any idea how they get the money out of China to pay $5 million or $4 million or as you say, in one case, $20 million?

TREASURER:

We’ve got – money comes from lots of different sources now. I mean, I don’t want to particularly focus on Chinese because there is a lot of fifth generation Chinese-Australians, and in part what we’re doing is providing integrity around the system so that we don’t get into these sort of stereotypes. China is also our biggest trading partner, so there is a lot of money that comes into Australia from China, as there is a lot of money that goes from Australia to China. There are different ways people bring money into the country; they bring it through third-party countries, they can bring it in through the United Kingdom or New Zealand or the United States…

RAY HADLEY:

What about – a mate of my mine told me they bring it through, of all places, Malta, which has unregulated banking? I don’t know whether that’s true or not.

TREASURER:

Yeah, there are certain restrictions on, obviously, money laundering and there are very strong laws around money laundering. There’s also significant restrictions on bringing in cash, as we all know, into the country. But look, there are lots of different places that money can flow to. I mean, money moves quicker in this world than at any time in our lives and it comes from lots of different places, Ray. I mean, as you know, if you go out to the track you can see an enormous amount of money being turned over at the track. I’m not saying every single dollar out at the race track or every single dollar that goes through a casino is a perfectly legitimate dollar, but we do our best to track it down.

RAY HADLEY:

Sure. I mean, one of the things – and what we’re talking about here are Chinese non-citizens, that’s what we’re talking about.

TREASURER:

No, no – any non-citizens, they could be from anywhere.

RAY HADLEY:

I know, I know, but we can’t mince words. Most of the people are blue about the Chinese buyers. I mean, you know, we can say they come from Chile – or Chile as you like, or they come from here, they come from there. At the end of the day, you know, you keep reading the reports that if there are 22 registered buyers – 21 are Asian people. They could come from Hong Kong, they could come from Singapore, they could come from China, but they’re Asian people. Is it right that you can’t buy freehold land in China so the greater attraction for high-wealth individuals in China is that they can come here and actually buy it and own it?

TREASURER:

Look, you’re asking me a question I can’t particularly answer. I know you can buy units in China. I mean, they’re marketed quite freely in Australia…

RAY HADLEY:

They tell me that they can only lease land over there for 99 years, they can’t buy it freehold like we can.

TREASURER:

Yeah, I mean, that may be the case but I mean, the whole – for example – the whole of the ACT is leasehold too for 99 years and look, the bottom line is, you can’t pick up the dirt and take it overseas. If people are putting money into real estate here it usually leads to a lot of jobs in construction and that’s been hugely important over the last two or three years in the Australian economy. We’ve had a surge of construction. I mean, look around Sydney and you can see an enormous amount of apartment construction and I think it’s terrific – a lot of sparkies, a lot of plumbers and concreters, the whole lot and that’s good and we welcome that investment. If they want to spend $800,000, $900,000 or $1 million buying a property here for a student that’s studying here and paying [inaudible] that’s terrific, that’s great for our economy, it creates jobs. But, we also want to make sure that the rules that are in place are enforced and what angers me the most is not once under the previous Government did anyone ever enforce the laws in relation to foreign ownership of existing real estate and it’s something where the resources have been woeful, the enforcement has been woeful. We’re changing it. There needs to be integrity, and it’s on the back, Ray, of the Prime Minister and I announcing a new lower threshold in relation to foreign ownership of agricultural land…

RAY HADLEY:

Sure.

TREASURER:

…and the new register that we’re setting up so we actually do know who owns what in Australia.

RAY HADLEY:

But you can understand, Joe, because you are a realist, you’ve got the real estate agent down the road, he’s selling your place – your pre-owned home, and by law he’s not supposed to invite or let you know, international buyers who are non-residents or non-citizens participate but we all know if he gets, you know, $200,000 over reserve or $2 million over reserve, his commission goes up, he’s happy. The vendor’s extremely happy and the people who are dirty are the under-bidders who missed out on it.

TREASURER:

Yeah, I mean people will be upset if they miss out, there’s no doubt about that, but we’re introducing a penalty regime for real estate agents, migration agents and conveyancers and so on, that aid and abet people that break the law [inaudible] it will be the first time.

RAY HADLEY:

Would that apply to anecdotal stories about, you know, they’ve got a cousin over here who is a citizen but you know, he’s got the [inaudible] but all of a sudden he’s paying $9 million for a place at Rose Bay and it might be in his name but it’s not really in his name. Well, how do you police that?

TREASURER:

It starts to get very complicated obviously…

RAY HADLEY:

It does.

TREASURER:

…because, you know, it’s something that happens all the time within Australia as well as outside Australia, but again, you know, this is why the Prime Minister and I have put out this paper and you can go to treasury.gov.au to have a look at it…

And you can get that paper, but we’re saying enough. Four weeks consultation and then we’re taking action.

RAY HADLEY:

Right. So, you’re going to do this within a month, basically?

TREASURER:

Absolutely, we want to move on it. In fact, in relation to agriculture, from the 1st of March, anyone that buys agricultural property worth more than $15 million needs to get our approval.

RAY HADLEY:

What was it formally - $200 million wasn’t it or $240 million?

TREASURER:

Yeah and if not – well up to $1 billion in some cases and secondly, if you are foreigner buying agricultural land, we are setting up a register. It’s going to take us a while to work closely with our friends in the state government to get the data of the Land Titles Office but I’m pushing the bureaucracy hard to work that through.

RAY HADLEY:

And the new legislation will be, of course, covering pre-owned homes for want of a better term…

TREASURER:

Yep.

RAY HADLEY:

…but people are still free to buy new properties off the plan?

TREASURER:

Correct, but they’ve still got to register, they’ve still got to register [inaudible]

RAY HADLEY:

Oh, they’ve still got register for a new property?

TREASURER:

Yeah, yeah. I mean, new properties, you know – if there’s a scheme at the moment where…

RAY HADLEY:

But they don’t need permission on new properties do they like they need permission on pre-owned properties?

TREASURER:

No, but if you are selling 100 properties or more and you’ve got a development, you are required under Australian law to market it domestically as well and what’s happening is a lot of those developers are not marketing domestically as well. So, we’ve got a fine regime for those people. So, the bottom line is, if you’re foreigner seeking to buy real estate in Australia, you have to pay the fee no matter what and if you are a developer marketing property from Australia, you will need to pay the appropriate fees if you are pre-marketing and you need to market to Australian purchasers as well.

Alright then. Well, they’ll be plenty of people supporting you and cheering. The one final question is: do you think it’ll work?

TREASURER:

Yes I do, I do. I mean, Ray, I’ll tell you what’s frustrating…

RAY HADLEY:

What?

TREASURER:

…is you ask questions and you can’t get answers. I mean, [inaudible]

RAY HADLEY:

Hey listen, you want to come and do my job sometime [inaudible]

TREASURER:

But you know, you haven’t got a department with thousands of people. So, when I ask questions and can’t get answers because the rules have never been enforced…

RAY HADLEY:

Do you mean you feel a bit like Sir Humphrey?

TREASURER:

Well, Sir Humphrey was covering it up all the time. I feel a little bit like James Hacker.

RAY HADLEY:

Like Jim? So, you are actually Jim? Well, I don’t know if he was the Treasurer, I know he was Prime Minister eventually but he might have been the Minister for Housing at one stage, poor old Jim.

TREASURER:

Well, that’s right, I don’t know if he ever got the answers though but you know…

RAY HADLEY:

So, you’re confirming that life in politics is like Yes Prime Minister – you can’t get answers if you’re a politician?

TREASURER:

Ray, Ray, Yes Minister is a documentary in Canberra – it’s not a [inaudible] it’s a documentary, Ray. You sit there when you become a Minister and they run you through the whole series to understand what you have to go through.

RAY HADLEY:

Who’s your Sir Humphrey?

TREASURER:

If you go to one of the Foxtel channels, you’ll see on TV at the moment John Fraser – he’s a damn good guy. We’ve just brought him in as the new head of Treasury.

RAY HADLEY:

Well, you just ruined his life. He’s going to be known as Sir Humphrey from here on in.

TREASURER:

No, no, no. No knighthoods there.

RAY HADLEY:

Well, that’s a captains call you can’t make.

TREASURER:

The captain can’t either at the moment but…

RAY HADLEY:

I’m glad we can laugh about it.

TREASURER:

Yeah, you’ve got to laugh at this.

RAY HADLEY:

This is the happiest I have heard you for about two years. You’ve been that miserable I haven’t wanted to talk to you.

TREASURER:

Any time, Ray, I’m happy to talk about rugby league…

RAY HADLEY:

Yeah, I know, so you’re not talking about Treasury. Anyway alright, well I’m sure that the broader community will applaud what you’re trying to do and now they’ll hope it just gets done.